Guest Contributor: Jason Elmer, Director of Business Development, Abacus Group

The cost of owning and operating on-site IT resources has led hedge funds to adopt cloud-based IT solutions at an increasing rate. This momentum has been helped by a greater understanding of the compelling advantages in Scalability, Cost Predictability and Business Continuity associated with cloud-based services.

Scalability

Cloud providers stand apart due to their unique ability to efficiently adapt to changing business needs. Hedge funds no longer need to worry about how to expand their IT capacity to grow or enter new markets. Instead, managers can embrace an outsourced model that lets them focus on their core business rather than invest time and effort into solving IT problems. With cloud providers, ‘scaling up or down’ can be as simple as a phone call.

Cost Predictability

Hedge funds need predictable expenses. With regulatory and investor pressures to do more with less, these funds do not have the budget to absorb unplanned IT-related expenses. Building an on-site data center exposes funds to significant implementation risk resulting from delayed and over-budget build-outs. A cloud services model eliminates this risk by offering an already functional infrastructure, and hence, drastically reduced start-up costs.

Unpredictable expenses don’t stop once the data center is built. Equipment can break or simply need to be replaced. Adding or removing capacity also results in hard-to-predict costs, including staff levels which must be adjusted. Cloud service providers hedge this risk in exchange for a predictable monthly subscription fee.

Business Continuity

Hedge funds are held to high standards when it comes to their business continuity plans. A technology failure can be disastrous, yet many hedge funds have decided to entrust cloud service providers to ‘disaster proof’ their business. Dedicated cloud service providers benefit from economies of scale and offer a product that is constantly validated by other clients using the same service. Relocating and replicating IT resources to off-site locations also protects businesses from disasters in primary offices. Cloud providers often offer funds options to tailor solutions to their specific business needs, from moving all their IT resources offsite, or outsourcing only key components.

Key man risk is also common in hedge funds with only one or two IT people that are qualified to trouble-shoot technology issues. If they are unavailable at the wrong time, it can be disastrous for the business. Cloud service providers have dedicated staff monitoring the network 24/7 to address this concern.

Conclusion

It’s clear that the future for hedge funds is moving to the cloud, as the advantages offer the chance to scale and run operations more efficiently. Cloud IT services have become mainstream. The largest corporations and banks embrace it to manage some or all of their critical IT operations. Hedge fund managers owe it to themselves and their firms to understand the many advantages this model can bring to their business.